Articles & White Papers

"Are Financial Education Efforts Effective?"
Understand why educational efforts are often ineffective at boosting financial literacy and how behavioral research techniques may be applied to help solve the educational dilemma.

"Behavioral Barriers to Annuitization"
Inertia and regret aversion play dual roles in most retirees' decision to steer away from annuitization. The perception that annuitization results in a loss of control of an individual's assets is another factor. Learn why plan sponsors should consider offering annuities to assist employees with decumulation in retirement.

"Behavioral Finance and Retirement Planning: Key Lessons Learned"
Behavioral finance provides fascinating insights into participant behavior and provides tools to help employees make better financial decisions. This article reviews lessons learned over the past few years and lists the behavioral tools available to help plan sponsors and their advisors.

"Behavioral Glide Paths"
Should plan sponsors offer funds that reduce equity exposure over the lifecycle, keep it constant, or maybe increase it over time? While many different glide paths provide similar long-term outcomes, learn why standard downward-sloping glide paths that reduce risk over time still seem to make the most sense.

"Customized Retirement Date Funds: A Behavioral Perspective"
Defined benefit coverage, human capital, and risk preferences all offer unique opportunities for plan sponsors to customize retirement date funds to better serve their participants. Learn the factors that can determine if this approach is right for your employees.

"Do Employees Know Enough to Self-manage their Savings?"
The level of financial literacy among plan participants is extremely low, raising concerns about the ability of individuals to properly self-manage their retirement savings. Plan sponsors and their advisors should ask if increased education services are effective and, if not, how they can be made more effective.

"Helping Employees Develop a Financial Plan (and stop smoking)"
Explore how lessons learned in the use of 'commitment devices' (such as those utilized in programs to help participants quit smoking) can be allied by plan sponsors and advisors to overcome self control issues and make better decisions -- financial and otherwise.

"How Do People Actually Manage Longevity Risk?"
For individuals not covered by a defined benefit pension, asset annuitization is a primary source of retirement income. As potential changes in the U.S. Social Security system threaten to end compulsory annuitization, behavioral research indicates a potential crises in retirement income.

"How Much is Enough?"
Explore whether retirees may be short-changing themselves by planning for less replacement income than they may need—especially considering their expectations for spending in retirement—and look at some recent trends to learn what kinds of investment decisions are being made by individual investors.

"How Should People Manage Longevity Risk?"
Learn why understanding investor behavior as it relates to the decumulation stage, and longevity risk and individual bequest motives play important roles in determining the most appropriate level of asset annuitization.

"Hyper Loss-Aversion and Retirement Income Solutions"
While it's common knowledge that the average person is more averse to loss than to potential gain, research shows that retirees are far more sensitive to losses than the general population. Learn why testing retirement income solutions on employees before introducing your entire plan may be a key success factor.

"Market Timing and Saving Patterns"
Research shows that plan participants attempt to time the market. However, they typically exhibit negative market timing, where they end up buying high and selling low. Learn practical suggestions to help employees stick to their long-term plans in the face of unusual market volatility.

"Performance Chasing and Risk-Taking Behavior"
While plan participants did not panic and sell their equity funds after the market volatility in 2009, there was still some evidence of performance chasing. Learn why individual investors tend to take more risk after equity markets go up and avoid risk after markets drop, resulting in buying high and selling low.

"Psychological Barriers to Saving"
Learn how the desire for immediate gratification, aversion to losses, and inertia can prevent employees from making valuable investment decisions.

"Recommended Reading"
Recommendations and reviews of three books to assist retirement plan sponsors and advisors.

"Rethinking Financial Education and Communication Efforts"
The author outlines two approaches that may enhance the effectiveness of education and communication efforts designed to increase financial literacy among employees. Learn why plan sponsors should consider coupling education efforts with other initiatives to ensure the success of their retirement plan.

"Savings with a Thrill"
Learn why some employees are more attracted to the 'incentive of fortune' than the 'rewards of interest' and how you can leverage this fact to boost plan participation.

"The Positioning and Framing of Retirement Income Solutions"
Behavioral research shows that how choices and alternatives are framed when presented to plan participants can dramatically affect the decision-making process. Learn strategies for framing retirement planning choices in a positive way to increase better employee plan selections.

"Using Automatic Saving Increases Effectively"
Read about the value of escalator savings plans to significantly boost employee contributions in a relatively short time frame, as well as research-driven tips for an effective implementation that drives participation.

“Nudge: Improving Decisions about Health, Wealth, and Happiness” by Professors Richard H. Thaler and Cass R. Sunstein of the University of Chicago discusses how the effectiveness of retirement saving plans is greatly influenced by small design features.

“Predictably Irrational: The Hidden Forces That Shape Our Decisions” by Professor Dan Ariely of Duke University discusses many valuable ideas that can be applied to financial education and communication programs.

“Your Money and Your Brain: How the New Science of Neuro-economics Can Help Make You Rich” by Jason Zweig is a great review of the emerging field of neuroeconomics and its applications for investment decision making.

Retirement Plan Consulting Program and other advisory services offered through LPL Financial, a registered investment advisor.

This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.